Billionaire investor Bill Ackman remained a huge supporter for the struggling Valeant Pharmaceuticals (NYSE:VRX) since the company’s crises started unfolding last year. He not only defended his call on the company but also kept assuring its shareholders that Valeant would turn things around at some point. However to Valeant’s and its shareholders’ dismay its biggest supporter reduced his position in the company recently from 9% to 7.8%.
Even though the main reason for the cut was to “generate a tax loss in 2016” for shareholders, but seeing the current state of affairs of Valeant Pharmaceuticals (NYSE:VRX) the move makes perfect sense.
As the year comes to a close Valeant Pharmaceuticals (NYSE:VRX) remains one of the weakest investment options in the market. Despite a few bright spots here and there the company failed to show any signs of improvement. Analysts believe investors need to reconsider their positions in the company sooner than later, which suggests the next year may not be any different for the struggling pharmaceuticals giant.
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The biggest point of concern for Valeant Pharmaceuticals (NYSE:VRX) shareholders is that the recovery plan chalked out under the new Chief Executive Officer John Papa failed to show any promising results. The new strategy called for an immediate action plan to manage the company’s titanic debt of $30 billion. Valeant in order to deal with its huge debt struck various deals with its lenders, which have only resulted in rapidly increasing interest expenses.
According to analysts, the current debt situation for Valeant Pharmaceuticals (NYSE:VRX) has reached alarming levels. It is believed that if things remained the same next year as they did this year, it is quite possible Valeant may be looking at a technical default in the next couple of years.
It is no secret that road to recovery for troubled companies of Valeant Pharmaceuticals’ (NYSE:VRX) stature is a long one. Forced to sell its drugs, including its bestselling ones, at lower prices Valeant has no choice but to compromise on its profits. This makes it extremely difficult for a company to keep its investors happy especially when it also has to deal with a $30 billion worth of debt and ever increasing interest costs.
On top of this, analysts believe one cannot rule out the possibility of additional unpleasant surprises from the company. With the current crises even the most daring investors may not want to take a risk on such an investment hazard.
Valeant Pharmaceuticals (NYSE:VRX) currently has a market cap of about $4.91 billion. The stock’s 52-week range is between $13.00 and $109.55, which indicates how volatile the stock has been.